Windows - Cannot put PC with XBMC to sleep

I have Atom/ION based HTPC running Windows 7 32-bit and latest Eden version of XBMC. I have eHome USB IR receiver and Harmony 200 remote configured as MCE Remote. The remote can wake computer and all buttons operate fine except that nothing happens when I press the Power Off button. HTPC does not go to sleep. In Control Panel I have it setup so the power button puts computer to sleep. IR receiver blinks when the Power Off button is pressed on the remote but no action is visible on the XBMC/PC.

I am assuming S3 standby is enabled in your bios. One of the first things I install on all my Windows based HTPC builds is called MCE Standby Tool by Slick Solutions. I find it's great for enabling, setting up and solving various standby issues.